Welcome to the new normal!

Anyone thinking that the current state of the property market is a ‘blip’, and that everything will return to ‘normal’ (meaning rampaging property inflation and big profits) is, I’m afraid, deluding themselves.

What the property market has become over the past four years is now, itself, ‘future normal’ and we have to get used to this, because it is here to stay. There have been several key changes since we learned the phrase ‘credit crunch’ in 2008 and despite low consumer confidence and job insecurity, repossessions have not reached anywhere like the level of the early ’Nineties crash.

For a start, low interest rates mean that it has never been cheaper (in living memory at least) over such a sustained period of time to have a mortgage. And a more mature attitude by lenders to the Private Rented Sector has meant greater flexibility for homeowners to decide whether the home they own is the home they want to live in.

Constraints on mortgage lending mean that there is no shortage of tenants for buy to let landlords, with a 135 per cent increase in demand for rented homes since 2009 and steadily increasing rents – up by 4.3 per cent in the last 12 months.

At the same time, stringent deposit requirements mean that first timers are buying later in life – 38 now reported to be the average age unless supported by the ‘Bank of Mum & Dad’ – and for those working and living in areas of high property prices, buying a home where they want or need to live might, even then, be impossible.

While there may have been a move away from being a home-owning society, it doesn’t mean we aren’t still a property-owning society.”

The result has been that more first time buyers are buying their first home in an aff0rdable area, and then renting it out, while at the same time remaining tenants themselves.

It is becoming increasingly common to find a tenant applying for a tenancy is also a landlord themselves. So while there may have been a move away from being a home owning society, that does not mean we are not still a property owning society.

Or at least we aspire to be.

Despite everything, evidence exists of pent up demand, with intent frustrated only by ability to raise the finance to buy.

Perhaps for this reason, finance experts predict a recovery in house prices after a couple more years of flatlining, and they calculate that prices will not return to their 2007 peak levels until 2017 in cash terms, and not until 2024 in inflation-adjusted terms.

So the market we have now is the one that will be with us for the foreseeable future. The property sector needs to make its business sustainable in the market in which we are currently trading, because this is the property market of the foreseeable future.

Jan Hÿtch MBA FRICS FNAEA FARLA is a Partner at Arnolds Keys LLP and President-elect, NAEA.

AUCTION SALES ARE THE WAY AHEAD

Ronan Connolly says that the auction room celebrates a property’s unique traits – and sells!

Recent figures from Land Registry, heralding good news within the property sales market, will have no detrimental effect on auction houses this year. Land Registry reports that house repossessions fell by 11 per cent year on year since November 2011. While this is to be celebrated there may be concern that auction stock may fall. However, this would be true only if the bulk of properties sold at auction were the result of repossessions. This is not the case.

Indeed, figures from EIG, the auction information provider, dispel the myth that auctions are mainly hotbeds for repossessed properties at knock down prices. In fact, it suggests that only 20 per cent of properties sold at auction are repossessions, with the remainder being offered by a wide variety of sellers.

Latest figures dispel the myth that auctions are just for repo properties at knockdown prices.”

At our bi-monthly auctions there are usually commercial, residential and even vacant plots available and behind each lot is a seller who has chosen an auction sale for a particular reason. For example, house owners looking to raise money quickly will be drawn to the fast transaction time scale (usually 28 days) with an auction purchase. Renovation projects that prove too costly will often result in a successful sale at auction, usually to a buyer who had hoped to take up the original challenge.

Another category which fares better at auction are those classed as ‘unusual properties.’ Often these are houses that fall outside of the classic three or four bedroom located on a street. Whereas they may ignored in property search results, in an auction listing that unique traits can be celebrated rather than overlooked.

Preparation is the most important tool for potential buyers at an auction. The maximum bid should be decided beforehand and the ten per cent deposit must be available on the day if a potential buyer is going to bid.  Research of the chosen property should also be carried out beforehand. With this in place, an auction can be a really exciting and cost effective way to buy.

Ronan Connolly is Auction Sales Manager, The Venmore Group.

Raising professional standards

In recent years there have been numerous attempts to introduce rules and regulations to weed out rogue landlords and letting agents, but most of these have failed to impact. The multi million pound Landlord Registration Scheme introduced in Scotland to crackdown on rogue landlords has recently hit the headlines and been deemed a total failure. Reports on the scheme have been scathing, pointing at the cost of almost £18 million to the taxpayer and the fact that just 11 people had been reported in the last two years. Under the scheme, just 40 landlords have been  refused registration, yet 200,000 have successfully applied.

Although the intention of the scheme was commendable, enforcement was not fully considered and therefore it proved completely ineffective. Similarly, recent attempts to extend the Estate Agents Act to include letting agents have also failed, leaving the sector unregulated. However, in recent weeks an amendment to regulate letting agents by bringing them under the scope of the Estate Agents Act scraped  through in the House of Lords. This brings us one step closer to better protection of landlords and tenants but there is still a long way to go as the Conservatives have made it clear they are against regulating letting agents. It remains to be seen what will happen when the Bill gets back to the House of Commons.

The government must regulate the industry and insist that every agent is a member of a professional association.”

Of course, the vast majority of letting agents and landlords in the UK are reputable, but it’s the minority who hit the headlines and tarnish the reputation of the entire industry.

The government must regulate the industry and insist that every agent is a member of a professional association. If not, they should be closed down. A recent Which? survey found two thirds of tenants and nearly half of landlords did not know whether their agent belonged to a professional body. Clearly, having voluntary membership is not working. Much work needs to be done to explain the benefits of ensuring an agent is a member and therefore abides by professional standards.

In the last 15 years, the number of people who rent has almost doubled to 8.5 million. This figure shows no sign of falling and at a time when letting property is the norm for so many, trading standard rules are essential, meaning that all operators are regulated by the Office of Fair Trading (OFT). As the private rented sector  continues to play a vital role in fulfilling the housing needs of the nation, it is vital that adequate measures must be put in place as a priority to ensure we rid the industry of rogue letting agents and landlords for good.

William Jordan is Managing Director of residential letting agents and property management specialists, Jordan’s.